What is a guarantor loan?
A guarantor loan is a loan but that is guaranteed by someone that has a better credit history than you do. This term involves another one and that’s – guarantee.
A guarantee is a written promise of a guarantor. He ensures the lender that the applying person (the borrower) will stick with the terms and conditions of the loan agreement. The guarantee made by the guarantor involves the fact that if the debtor fails to pay off his loan, the guarantor has to step in and repay the debt. The guarantor, the third part of the contract, is a warranty for the banks that the loan will be repaid as it should.
The guarantor is the person that agrees to pay off the loan instead of the failing borrower. Usually, this person has a good character and a good credit score, which makes him the ideal customer for the banks.
Simple and easy loans
LiveFinance.org recommends this kind of loan because a loan obtained with the help of a guarantor, offers the chance to people, especially the young ones that have no credit history and a low source of income, to obtain a loan with a decent interest rate. This means that the time of being refused by banks when applying for a loan is over. As long as the guarantor knows that this a legally compulsory contract there shouldn’t be any problems at all. Usually, the applicant and the guarantor know each other by having one of the forms of relationships – relatives, friends, co-workers etc.
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